MONTGOMERY COUNTY ESTATE PLANNING COUNCIL OF PA

Council meeting 4:00-4:30pm           Presentation 4:30-5:30pm

Many families today when planning their estates find themselves needing advice on how to address the reality that one of their intended beneficiaries, typically a child or grandchild under age 40, is addicted to opioids, alcohol, or other addictive substances. Mental health issues such as schizophrenia, bipolar disorder, depression, or anxiety, may also be present.

Recommending a trust for such a beneficiary is a given, but what type of trust would be most suitable? A generic trust providing for “health, education, maintenance, and support” would be inapposite, since those distribution standards ignore the fact of the beneficiary’s addiction and could easily result in trust funds being diverted to purchase drugs or alcohol. Even a supplemental special needs trust focused on preserving SSI and Medicaid eligibility would not work, since its language -- typically limiting trust distributions to the “extras that will allow the beneficiary to achieve their maximum potential” -- would be too vague to compel the trustee to use trust funds to pay, for example, for the beneficiary’s stay in a rehabilitation facility.

Recovery-Based Model. Specialists in addiction medicine state that the most effective type of trust for these beneficiaries would be one that addresses their substance use disorder head-on. It will authorize distributions only if the beneficiary is pursuing treatment and recovery. Distributions will be based on the treatment plan as developed by the beneficiary and their treatment team, but with the trustee retaining final discretionary authority.

Taking this model as its focus, this article will discuss some drafting issues that will arise when parents and grandparents are designing a substance abuse trust for their child or grandchild, whether the trust takes effect during their lifetimes or after their deaths.

Martin J. Hagan serves clients in the areas of estate planning and administration, special needs trusts, elder law, estate and gift taxation, and estate and trust litigation. He is a Fellow of the American College of Trust and Estate Counsel, and former chair of the Allegheny County Bar Association’s Elder Law Committee.

Martin received his A.B. (’73) and J.D. (’76) degrees from the University of Notre Dame, where he served as a member of the editorial board of the Notre Dame Law Review.

Martin is the Editor and Principal Author of Drafting Wills and Trusts in Pennsylvania, 3rd Edition (2018), published by PBI Press, and the author of the chapter entitled “Health Care Directives and Decision-Making,” which is included in Elder Law in Pennsylvania, 4th Edition (2015), also published by PBI Press. Martin has also published on estate planning topics in the journal Trusts & Estates.

Martin is a frequent speaker on topics dealing with estate and trust planning, durable powers of attorney, and financial abuse of the elderly.  Most recently, Martin presented a paper entitled “Drafting Substance Abuse Trusts for Children and Grandchildren” at the Estate Law Institute sponsored by the Pennsylvania Bar Institute in Philadelphia.

Martin was the Keynote Speaker at the 40th Annual Red Mass, co-sponsored by the Diocese of Greensburg and St. Vincent Archabbey. 

1 hour Continuing education credit is approved for this course for PA insurance, attorneys (pending), accountants; certified trust and financial advisors; and certified financial planners.

Thank you to our generous sponsor Life Managers and Associates. Visit their website here.